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Most advisors recognize that clients are unhappy with returns in the last decade, but believe they are satisfied with communication and the relationship as a whole.
That’s why three recent conversations I’ve had with investors and advisors should set off alarm bells.
Three causes of client defection under your control
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In my 25 years working in the investment industry, I’ve had numerous conversations with advisors and investors about what makes clients leave. Sometimes it truly is beyond advisors’ control – markets underperform, clients have unrealistic expectations or feel they can save money investing on their own. And sometimes clients are won over by a sales pitch from another advisor who shot the lights out.
But often, the issues that cost clients fall into three categories that are absolutely within advisors’ control.
The first of these relates to communication.
A recent article described a conversation with clients thinking about switching because they weren’t getting updates between annual meetings on market developments, leading them to wonder whether their advisor was actually on top of what was happening. Other clients complain that they never hear from their advisor unless they initiate contact or that when they meet, their advisor dominates the conversation.
A second set of issues within advisors’ control that damages relationships and can cost clients hinges on responsiveness and clients feeling unimportant or unappreciated.
A while back, I wrote about clients who left because their advisor hadn’t responded to requests for a comprehensive financial plan. Other clients have talked about advisors failing to respond to questions in a timely fashion or things like changes of address that drag on without resolution.
A third cause for clients leaving today is the sense that their advisor is too passive in recommendations to make changes to their portfolio. In markets like we’ve seen of late, many clients want to feel that their advisor is actively looking for better opportunities. I recently talked to an advisor who lost a half-million dollar client and asked his branch manager to call the client to get feedback.
“I liked working with John,” was the response from clients, “ but all we’ve heard for the last five years is to be patient and hang in there. Given everything that’s gone on, it’s hard to imagine that the portfolio that made sense five years ago still makes sense today.”
On this last issue, you can recommend that clients stick with their portfolio, but understand that today many clients are looking for their portfolio to be actively managed; if you’re recommending a status quo approach, you have to take time to demonstrate that you’ve looked at all the alternatives and that this isn’t simply the path of least resistance for you.
“What we have here is a failure to communicate”
The big problem isn’t client unhappiness with communication, responsiveness or proactive advice. The problem is that in many cases advisors are oblivious about these satisfaction gaps and only learn about them when clients leave.
In the words of the warden in the Oscar winning 1967 film Cool Hand Luke – “ What we have here is a failure to communicate.”
One way to open the lines of communication with clients is by soliciting their feedback via an online survey. A recent article described the Net promoter methodology to measure client satisfaction and loyalty.
Ask questions that will get clients to open up about how they really feel. One of the best ways to get feedback is with the simple question: “ What one thing could I do to improve your experience working with me and my team?”
There are two ways you can get structured feedback from clients. A low-cost option is to develop your own survey using online tools such as Survey Monkey.
Alternatively, you can engage one of the firms such as Advisor Impact that’s in the business of conducting audits of client satisfaction. These firms provide a proven battery of questions and require less effort on your part, they also have the advantage of showing your results compared to benchmarks of other advisors.
However you go about doing this, if you want to reduce the risk of losing clients due to communication gaps, put structured feedback at the top of your priority list for the period ahead.
conducts programs to help advisors gain and retain clients and is an award winning faculty member in the MBA program at the University of Toronto. To see more of his written and video commentaries, go to www.clientinsights.ca. Use A555A for the rep and dealer code to register for website access.
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